What Is Risk Management?
Risk management is the process of controlling how much can be lost on one trade and across a sequence of trades. It helps keep one mistake from becoming an account-threatening problem.
Topic: Position Sizing
Position Sizing
Position sizing converts your planned dollar risk and stop distance into the amount you should trade. The correct lot size comes after the risk decision, not before it.
Risk per Trade and Risk-to-Reward
Risk per trade defines the planned dollar loss if the idea fails. Risk-to-reward compares that planned loss with the potential gain being considered.
Lot
A lot is a standardised way of describing the size of a Forex position.
Pip
A pip is a standard unit used to describe a change in a Forex quotation.
Position Size
Position size is the quantity of a currency pair held in a trade.
Pips, Lots and Position Size
Pips tell you how far price moved, lots tell you the size of the position, and position size determines how much that movement is worth in dollars.